Early trial sought for Ken Lay in bank fraud case

Published 5:30 am, Tuesday, April 5, 2005

Ken Lay
is expected in court in January 2006 to be tried with two colleagues for fraud at
Enron
, but prosecutors would like to see him there sooner.

Enron Task Force prosecutors asked Monday that Lay, former chairman of the energy giant, be tried on his personal banking fraud charges in May or June of this year.

Legal experts read varied motives into this government tactic and do not entirely agree on how U.S. District Judge Sim Lake might respond, although more expect the judge won't push Lay to trial. Even Lay's lawyer, Mike Ramsey, calls the request "intriguing."

Some say the judge will not muddy local waters by trying the smaller case against Lay first and exposing the larger Enron fraud cases' jury pool to a big dose of publicity.

But another experienced lawyer notes that a quick bank charge trial could mean Lay's involvement in the larger fraud case is pared down if he winds up making a deal with the government, and that might appeal to the judge.

Lay's Enron fraud trial, along with co-defendants ex-CEO Jeff Skilling and former top accountant Rick Causey, is scheduled for January 2006 and is expected to take months. But Lay also faces four personal bank fraud charges that allege he lied to banks about how he would use $75 million in loans.

Quoting heavily from Lay's statements, interviews and a post-indictment press conference in which Lay repeatedly insisted on a speedy trial, Enron task force director Andrew Weissmann asked for a quick trial on the bank charges.

In March, Lay entirely abandoned his many speedy trial requests and asked that his bank charges be tried after the larger Enron fraud trial.

Change of heart

"Now when he can have what he has so long championed in the media and before the court, Lay balks," prosecutors said of Lay's recent change of heart. Lay's many requests for a fast trial "now serve to hang around his neck like the Mariner's albatross," prosecutors wrote.

Judge Lake had asked both sides to comment on the possibility of trying Lay's personal banking charges to the same jury that would have just heard the months-long Enron fraud trial.

In asking for two separate juries instead, Lay in March also asked for some time after the big fraud trial to regroup for the banking case.

In its filing Monday, the government argues the bank case will take about a week and there is no reason to postpone it for a year.

"In short, the government's and public's strong interests in a speedy trial of Lay overwhelmingly outweigh Lay's meager interest in delay and consequently amply warrant scheduling the bank fraud charges for trial this spring," the government said.

Ramsey, Lay's lawyer, said he'll be studying the many angles of this request before he formulates a response.

Facing seven charges

In the larger fraud case, Lay faces seven charges relating to the demise of Enron, while his co-defendants face more than 30 charges each including conspiracy and fraud.

But the longest prison terms facing Lay come from the four banking charges carrying 30-year penalties each. These four charges allege he lied to banks about how he intended to use $75 million in personal loans.

The indictment accuses Lay of making false promises that he would not use his millions of dollars in loans to buy stock on margin. The bank allegations don't allege that Lay stole from the federally insured banks, but that the banks could have been put at risk because he made a false representation.

Houston defense lawyer Kent Schaffer said he doubts Lake will proceed with the bank case now for fear it would create such a public stir it could increase the chances the big trial would have to be moved.

"It may be a weeklong case, but it's Ken Lay, someone who's been vilified probably more than any other figure in pop culture outside of the Una- bomber," Schaeffer said.

Possible dismissal

He said the judge has to realize that, especially if Lay is convicted of Enron-related fraud, the personal banking charges will likely then be dismissed by the government.

Joel Androphy, also a Houston defense lawyer, said this request reminds him of proposals from the government in other cases he's had.

"I think the judge may bite. This could be a mechanism to favorably disrupt the process and eliminate the big trial or at least its longevity," Androphy said.

He figures that if Lay loses the bank charges case, the government would have so much leverage because of the high prison term attached to it they could convince Lay to testify. And, he suspects, if Lay wins the bank case, the government could find it easier to drop the Enron fraud charges if Lay will agree to testify. Others closer to the case, however, do not expect Lay to ever become a government witness.

"I've done this with the government before. They have a lot of leverage, and they play a lot of side games," Androphy said.

Lay should agree to be tried now, Androphy said.

"His best chance is when he's not sitting next to Skilling and Causey," he said.

Dan Cogdell, the Houston lawyer who won the only Enron defendant acquittal so far — of Sheila Kahanek — said this "seems a fairly transparent tactic to advantage the government in their biggest Enron trial."

"Judge Lake will recognize that the reasonable thing is to try the big case first. To do otherwise will put the cart in front of the horse, which is a bad thing unless your horse knows how to push," Cogdell said.